Treading water.



Mortgage investors have largely gone to the sidelines today - waiting for the dust to clear from this week's roughly 200 basis-point price drubbing.



Investors will look to the post-meeting statement from the Federal Open Market Committee next week Tuesday together with the snapshot of current inflation pressures at the wholesale and consumer level for cues to the likely direction of mortgage interest rates. If traders are comfortable with the level of inflation already priced into the mortgage market there is a better than even chance mortgage rates will creep fractionally lower - probably at least into the end of the year. On the other hand, in the off-chance the data reveals inflation is running at a stronger than expected pace - look for mortgage interest rates to continue to move higher.



The "wildcard" of the coming week is the pending vote on extending the Bush era tax-cuts as well as preserving the emergency unemployment benefit program -- both originally scheduled to expire on December 31st. The "rumor mill" suggests a congressional decision may come as early as Monday. If the measure passes keep your fingers crossed that the majority of investors feel that the surge in inflation, combined with the spike in the national debt load this piece of legislation is expected to create, has already been well priced into the credit markets. If not, the upward spiral of mortgage interest rates will almost certainly continue - no matter what the data from the November Producer and Consumer price indexes might otherwise indicate.